Anil Starch Products vs Commissioner of Income Tax

G.T. Nanavati, J.—The Income Tax Appellate Tribunal has u/s 256(1) of the Income Tax Act, 1961, referred question No. 1 at the

instance of the assessee and question No. 2 at the instance of the Revenue for the opinion of this court. The said questions are as under :

(1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to depreciation of Rs. 9,713 on the written down value of

building and plant used for research relating to the business of the company ?

(2) Whether, while computing the capital employed for the purpose of relief under, section 80J, debts and liabilities are required to be deducted ?

The points which arise for our consideration are covered by a decision of the Supreme Court in Escorts Limited and Others Vs. Union of India

and others, . The Supreme Court has held that (headnote) :

Before the 1980 amendment, the 1961 Act did not permit a deduction for depreciation in respect of the cost of a capital asset acquired for

purposes of scientific research to the extent that such cost had been written off u/s 10(2) (xiv) of the 1922 Act or u/s 35(1) and (2) of the 1961

Act, and there was no difficulty at all in the interpretation of the provisions. The 1980 amendment has effected no change at all in the provisions

except to set out more clearly and categorically what the provisions said even earlier.

In view of the said decision of the Supreme Court, question No. 1 will have to be answered in the negative, that is, against the assessee and in

favour of the Revenue.

In Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, the Supreme Court has held that borrowed moneys and debts are

required to be excluded while computing capital employed while considering the claim of the assessee u/s 80J of the Act. Therefore, question No.

2 will have to be answered in the affirmative, that is, in favour of the Revenue and against the assessee. The reference is disposed of accordingly

with no order as to costs.